Cisco Systems, Inc. (NASDAQ: CSCO) has reported the adjusted earnings per share of $0.57 in the second quarter 2017 ended 31st December, beating the analysts’ estimates for the adjusted earnings per share of $0.56. As a result, the stock rose over 2.7% during the afterhour’s trade on February 15th, 2017. CSCO stock has risen over 30.7% in the last one year (source: Google Finance).
Additionally, CSCO got the benefit from the national program in China where they were rolling out set-top boxes and the company were providing smart cards for secure access, with strong margins, that has slowed dramatically. In addition, CSCO is also facing significantly higher memory costs, with dramatic increases. The gross margins fall from 63.3% to 62.4% from the second quarter of 2016.
Meanwhile, Cisco Systems had reported the adjusted revenue fell of 2.9 percent to $11.58 billion in the second quarter 2017, beating the analysts’ estimates for revenue of $11.55 billion. The revenue in the security business, that offers firewall protection and breach detection systems, grew 14 percent to $528 million. The analysts on average had expected $519.1 million, as per the market research firm FactSet Street Account.
Going forward, for the fiscal third quarter, CSCO expects the earnings per share in the range of $0.57 to $0.59 and revenues are expected to range between flat and down 2%. The consensus estimates by the analysts are projecting for $0.58 of earnings per share and $11.86 billion in revenue. In addition, CSCO has planned to acquire AppDynamics which, combined with Cisco’s networking analytics, will provide the customers with unprecedented insights into business performance.
CSCO has declared a quarterly dividend of $0.29 per common share, which is a three-cent increase over the previous quarter’s dividend, to be paid on April 26th, 2017 to all shareholders of record as of the close of business on April 6th, 2017.
On the other hand, CSCO’s customers are losing in the cloud to vendors like Alphabet Inc, Microsoft Corporation and Amazon.com, Inc., which prefer to build their own hardware from parts, rather than buying high-end gear from outside vendors. Therefore, CSCO is now seeking to transition toward the software, adding talent in analytics, machine learning, and artificial intelligence. CSCO’s 31% of revenue is now subscription-based, rather than product revenue and the company is trying to make that shift. Further, CSCO has plan to add new subscription services in analytics and automation over the next year.